May 26, 2021
6 min read
3230reads
All industries benefit from the security and diverse functionality of virtual data rooms (VDR), but legal companies experience the most improvement. Let’s examine how a well-selected legal data room can accelerate the governance and flow of the law firms’ business dealings.
What is a virtual data room for lawyers?
Most providers of virtual data rooms offer solutions for various industries. The final product usually varies in features and organizational patterns. However, in the legal industry or life sciences, for example, there is also a specific compliance requirement.
This way, a virtual data room for lawyers becomes a digital data exchange platform that combines the necessary tools and certifications for organized legal work.
Insight:
Virtual data rooms for the legal industry vary in pricing and feature sets. It is important to consider your company’s unique demands to make the right choice.
Shifting from physical data storage to virtual data rooms was a part of the digitalization strategy for many law firms. But some are still hesitant to explore the VDR’s possibilities because of available free cloud storage solutions on the market.
Why are free cloud storage services not suitable for legal use?
Why pay for a legal data room when there are so many free cloud-based services? The answer is quite simple — security.
Public-access file exchange platforms accommodate millions of users daily. The sheer volume of users creates a proportional risk of hacker attacks and data leaks. Cyber risk rates increase each year, often affecting globally renowned companies and products.
Insight:
According to the 2020 Year End Data Breach QuickView Report by RiskBased Security, over 37 billion records were compromised last year. The number was a 141% increase over 2019 and an all-time high in the report’s history.
Although the free-access data handling platforms continue evolving and enhancing their security, their efforts are insufficient.
Legal firms require utmost confidentiality, which makes public services an unsuitable choice. But the exemplary security practices are not the only benefit of a virtual data room for lawyers.
The benefits of a legal data room
A virtual data room for lawyers offers the following advantages:
- Absolute confidentiality.
An established legal data room will implement the best practices for safe file-keeping. Top-level security combines state-of-the-art technology and advanced physical data storing facilities.
- Straightforward organization.
Virtual data rooms make accessing, organizing, and viewing documents very easy. For lawyers, using templates and spending less time switching between tools and platforms ultimately means faster and more effective deal flow.
- Convenient centralization.
A legal data room control dashboard is a one-stop-shop for all file access management, communications, and task planning. Observing the big picture often serves as an asset in optimizing legal procedures and prioritizing correctly.
- Streamlined diligence.
The intricate due diligence process can be a lot transparent with a well-structured virtual data room for lawyers. Various tools and access control options help eliminate the need for external services and traditional data rooms.
- Enhanced communication.
Modern virtual data rooms step well outside their original data storing and sharing purpose. Law firms can now facilitate data gathering, live discussions, and even full-scale board meetings.
How virtual data rooms are used in the legal industry?
The VDR’s advantages, such as improved confidentiality, organization, communication, and many other helpful features create limitless usage possibilities. Here are some of the most common use cases of virtual data rooms in the legal industry:
Extranet
A virtual data room for lawyers can serve as a client portal. Centralized document storage, live communication tools, and access monitoring significantly streamline data exchange for all parties.
VDR tip:
Establish distinct segregation between the firm-only data and the client’s documents. You can use color-coding and auto-indexing tools or create separate data rooms depending on your company’s size.
Litigation
A legal data room allows collaborating and exchanging information with all parties during each stage of the litigation process.
VDR tip:
Ask your legal data room provider how many guest visitors are allowed under each payment plan. Guest access is ideal for inviting external specialists, such as investigators and the other party’s representatives.
Legal due diligence
Due diligence can be sped up by 40% with the right virtual data room for lawyers. Built-in analytics and access reports help to observe the process better and develop new strategies on the go.
VDR tip:
In the beginning, take full advantage of pre-designed legal checklists provided by the VDR platform.
Corporate minutes
Minute books can also benefit from virtual data rooms as they are stored securely and conveniently. Adjust the file formats and access settings to meet your team’s requirements.
VDR tip:
Some Virtual Data Rooms offer automatic minute taking. Experiment with this tool to optimize the meeting’s organization and cut costs.
Public finance
Use the legal data room to store and update information on bonds, disclosures, underwriters, trustees, and the bondholder’s counsel.
VDR tip:
When inviting third-party users to the room, establish timed access restrictions to direct focus and protect future data.
Mergers & Acquisitions
Virtual data rooms allow managing multiple M&A transactions simultaneously. By helping you establish an organic deal pipeline, a legal data room guarantees effortless organization and decision-making.
VDR tip:
Use the Q&A feature to address any possible concerns and keep all the data centralized.
The key features of a virtual data room for lawyers
Let’s briefly go over the must-have legal data room features.
| Feature | How does it help? |
| Documents heat map | Optimize the process by evaluating which legal data room users and sections are the most active. |
| Collaboration/Integration | Seamlessly merge the virtual data room for lawyers with Salesforce, MS Teams, Slack, and others. |
| Drag & Drop file upload | Save time by uploading documents and folders in bulk. Use auto-indexing to make the virtual data room’s data is easy to navigate. |
| Request imports | Import the existing diligence request lists from Excel in a couple of clicks. |
| Custom permissions | Adjust viewing, downloading, and printing rights for each document and user. |
| Full-text search | Find the necessary information faster by searching keywords and phrases throughout the entire legal data room. |
| Track integration progress | Make sure all stakeholders and others with access to the legal data room are on the same page. |
| Watermarking | Enable automatic watermarks to protect the document throughout its existence. |
| Fence-view | Eliminate the risk of unsolicited viewing by only displaying the central part of the document. |
| Granular document permissions | Establish detailed access policies for every document. A virtual data room for lawyers features up to eight protection levels. |
| Time and IP restrictions | Limit access to the legal data room by enforcing a time widow or IP address. |
| Notifications | Quickly notify necessary users about any changes and upcoming events. |
How to choose a legal data room?
When choosing the virtual data room for lawyers, it is crucial to ensure adequate compliance. A legal data room has to present the proof of the following:
ISO 27081
This certificate guarantees the best internal practices in data security, availability, and privacy.
FINRA
Financial Industry Regulation Authority ensures that virtual data rooms correspond with the fair financial market standards.
SOC1 or SOC2
Service Organization Control principles focus on assessing the quality of organization, communication, risk management, monitoring, physical data access, and system operations.
The best virtual data room for lawyers
Choosing the most suitable legal data room for your firm is based on three principles:
- Experience in the segment
- Feature set
- Compliances
On top of that, concentrate on meeting your company’s needs when navigating the market of virtual data rooms.
An established virtual data room for lawyers that speaks to your cause and offers all the necessary tools is the most optimal solution.
References
- “2020 Year End Data Breach QuickView Report” by RiskBased Security. https://pages.riskbasedsecurity.com/hubfs/Reports/2020/2020%20Year%20End%20Data%20Breach%20QuickView%20Report.pdf
- Sep, 2014. “The evolution of virtual data rooms in M&A” by Justin Tinker. https://www.financierworldwide.com/the-evolution-of-virtual-data-rooms-in-ma
- International Organization for Standardization ISO Central Secretariat. https://www.iso.org/standard/61498.html
- Financial Industry Regulatory Authority Corporation. https://www.finra.org/compliance-tools